IBERIABANK, False Claims Act, Arkansas 2014

GRAVEYARD FOR GOODWILL: IBERIABANK Corporation, a financial institution with a history of questionable practices, has agreed to pay a hefty sum to resolve allegations of False Claims Act liability.

The $11,692,149 payment, agreed upon by IBERIABANK Corporation, IBERIABANK and IBERIABANK Mortgage Company, is a result of allegations that they violated the False Claims Act by falsely certifying compliance with Federal requirements to obtain insurance on mortgage loans from the Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD).

Principal Deputy Assistant Attorney General Chad A. Readler stated, ‘Mortgage lenders must follow FHA program rules designed to avoid putting federal funds at risk and increasing the chances that borrowers may lose their homes.’

During the time period covered by the settlement, IBERIABANK participated as a direct endorsement (DE) lender in the FHA insurance program. A DE lender has the authority to originate, underwrite and endorse mortgages for FHA insurance.

As a direct endorsement lender, IBERIABANK certified compliance with material FHA requirements. However, the bank admitted to certifying mortgage loans that did not meet HUD underwriting and origination requirements and were, therefore, ineligible for FHA mortgage insurance under the DE program.

IBERIABANK admitted to the following facts:

– Between Jan. 1, 2005, and Dec. 31, 2014, IBERIABANK certified for FHA insurance mortgage loans that did not meet HUD underwriting and origination requirements and were, therefore, ineligible for FHA mortgage insurance under the DE program.

– IBERIABANK paid incentive payments to underwriters and others who performed underwriting activities between 2005 and 2014, despite being notified by HUD in 2010 that it was not in compliance with the underwriter commission prohibition.

– Between 2005 and 2014, IBERIABANK did not timely self-report material violations of HUD requirements.

IBERIABANK Corporation is headquartered in Lafayette, Louisiana, with branches across the Southeast, including Arkansas. The company’s settlement is a result of its conduct and omissions, which caused HUD to insure loans approved by the Bank that were not eligible for FHA mortgage insurance under the DE Program, resulting in losses for HUD when it paid insurance claims on those loans.